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Cogenpower – from AIM listing to working capital “constrained” & auditor resignation in 15 months

By Steve Moore | Wednesday 10 May 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


12th February 2016: “Our admission to AIM comes at an exciting point in the company's development and marks an important step in Cogenpower (CGP)'s evolution to becoming a leading low-carbon energy business for urban communities”. 3rd May 2017: “Working Capital and Operational Update”, 10th May 2017: “Resignation of auditor”. Uh oh.

The 3rd May update included that the company’s “working capital position… remains constrained” and that it “currently remains reliant on the continued support of Unicredit S.p.A (its main banker) and its principal trade creditors to mitigate the impact of lower cash generation during the warmer months and the dispute with the GSE”.

The GSE is the Italian supervisory agency, with Cogenpower noting “delays surrounding the payment… of €0.9 million of Green Certificates earned by the company during 2015. These have been the subject of a dispute with the GSE… seeking to retroactively revise the basis of calculation for such payments” Meanwhile, today’s announcement includes that one trade creditor is auditor BDO and that;

“After discussion with BDO on the likely timing of the company clearing outstanding balances, which the company has advised BDO it wishes to review, it became clear that it was unlikely to be resolved before the end of June, when an audit certificate would be required. BDO explained that, in that case, their ability to be independent would be compromised and they would not be able to give an audit opinion. It was therefore agreed that they would stand down as auditor of the company.”

It is also noted that “BDO Italia remains as auditor of the company's Italian subsidiaries” and that “the company is in discussions with a replacement auditor and a further announcement will be made shortly”. Hmmm. I also note that the end of June is not long for a replacement auditor to be appointed and properly conduct an audit – rather raising the question of why, with the company’s year end 31st December, this is all only occurring now?

Together with the explicit “constrained” working capital position, this is all quite a position for a company which listed on AIM just 15 months ago! That was at 20p per share. Now below 6p, this still looks a bargepole stock.


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